Posts Tagged ‘Home Buying and Selling Process’

Since the slowdown of the real estate market in 2006, many homebuyers and investors are taking advantage of the buyers’ market and purchase at a lower price. It is not uncommon for unmarried couple, or two roommates, or a group of friends to invest in a real property.

While the idea may seem on the surface like a good opportunity for renters who wish to become homeowners or investors looking for ways to capitalize on the current housing downturn, however there are many LEGAL problems and potential risks for unmarried/unrelated persons purchasing real estate together.

Most (not all) married couples purchase real estate either as Tenants by the Entirety ( in the states where it is allowed) or as Joint Tenants with the Right of the Survivorship – either way the surviving spouse is protected and the property is shared equally. The exception is the Tenancy in Common which does NOT automatically offer protection to the surviving spouse and owners can own unequal shares.

The mortgage obligations and the way title is taken can punish the participants to the transaction for years to come. This is especially true if all co-owners are on the title, but only some sign the mortgage – in case of default all co-owners who are on the title are responsible for the mortgage, however those who did sign the loan stand to loose more in terms of their credit rating.

This is why it is of utmost importance to have a well written, detailed legal agreement prepared BEFORE the property is purchased by a knowledgeable real estate attorney that clearly spells out all the terms of the agreement to co-own:

  •  how title to the property will be held
  • who owns how much of the property
  • what amounts were contributed
  • who is responsible for mortgage
  • what happens if the partnership dissolves
  • future repair and maintenance costs
  • HOA fees
  • utility costs and other expenses
  • who pays all the property taxes, unless the lender pays via escrow
  • how the tax deduction for the mortgage interest will be split
  • what happens if one or more of the co-owners abandons the property
  • what happens if one of the co-owners decides to sell or transfer his share
  • how the ownership arrangement will be dissolved
  • how the proceeds of the sale will be distributed

Choosing the way unmarried co-owners take the Title to the property depends greatly on the relationship of the co-owners:

  • Joint Tenancy with the right of survivorship
  • Tenancy in Common
  • Limited Liability Company

To read about various ways that Title to real estate property can be taken, visit May 2009 blog:


While there are many benefits to co-ownership, there are certainly risks as well. Married people have comprehensive divorce laws that offer legal guidelines in the event of split – those who purchase real property with non-spouse do not have that legal benefit and protection.

All the more reason to consult a real estate attorney and tax accountant BEFORE purchasing a property with siblings, friends, or other investors to protect interests of everyone involved. A well written, detailed agreement can save a lot of headache and legal fees in the future.



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In a tough housing market – like the one we are experiencing  in 2008 and 2009 – when the listings linger on the market, the sellers (and their agents) sometimes attempt to reverse their luck with “creative” marketing.

One of the examples of the “creative” marketing is offering a Bonus to the Buyer Agent.  The bonus is perfectly LEGAL and can take two forms: higher commission offered to the selling broker paid by the listing broker AND/OR an additional Bonus. The Bonus amount can range anywhere from $1K t0 $15K.  The hope and intent is that the extra bonus will draw the attention of  the Buyer Agents (also called the Selling Agents) and motivate them to go an extra mile to find a Buyer for the property by giving the Selling Agents that extra incentive.

The bonus often is conditioned on delivering “a reasonable offer” or “a full price offer.”

Again, the bonus is perfectly legal as there is no federal or state law that forbids the seller to offer such bonus.

Now, let’s look at the bonus from the Buyer Agent’s ( = Selling Agent’s) perspective.

While, it is true that the federal and state laws allow such bonus – the federal and state laws demand of a Buyer Agent: 1) putting Buyer’s interests first and foremost, 2) full disclosure.

It means that no self- respecting Buyer Agent would ever put a bonus, no matter how big, before the best interests of the client – knowing that in real estate reputation and trustworthiness are priceless.

Every listing that offers higher commission or a bonus MUST be disclosed as such to the Buyer BEFORE the offer is submitted for that property – this is a LAW and any Buyer Agent NOT disclosing it properly in writing risks severe monetary penalty and/or revocation of license.  Needless to say, this a very delicate situation, legally and professionally. The intent of the law requiring full disclosure in writing is to protect home buyers from possible fraud and conflict of interest.

In any event, a responsible Buyer Agent will prepare a CMA, Customized Market Analysis, for the property to make sure that the listing  represents the true market value and is not overpriced before submitting the offer – that is, IF the BUYER chooses to submit an offer.

The point is, at the end it is ALWAYS the BUYER’s decision – regardless of the bonus.  A reasonable Buyer will ONLY submit an offer when it is genuinely the BEST VALUE for the price. The real estate statistics prove that over and over again.

In addition, if the Buyer Agent and the Buyer mutually agree to share the bonus, the bonus MUST be disclosed to the LENDER and listed on the HUD-1 settlement statement – not disclosing it would be a violation of federal laws, RESPA.

In summary, if you are a Seller and want to offer a bonus to the Selling Agent, it is very genereous of you and perfectly legal.  However, do not expect “a full price offer” UNLESS your property is priced correctly and represents a great investment opportunity for the Buyer.

Woudn’t You want to receive a fair representation if You were the Buyer?

Having said that, the bonus may ( and occasionally does) work in the Seller’s favor, as it was intended.  For example, if the Buyer in the very final selection has to choose  among 2-3 equally good properties, the chances are that the Buyer will choose the listing because of the bonus. Sometimes, when the Buyer Agent did an outstanding job, the Buyer may want the Agent to have the bonus as a token of appreciation.   

The Buyer Agent is there to help his/her client find the BEST property with the best VALUE for the LOWEST price tag in that Buyer’s price range.   Likewise, the Listing Agent’s sole goal is to produce the highest bidder for the property within the TIME-FRAME specified by the Seller, regardless of existing market conditions.

If you wish to learn about Home Buying and Selling Process and Home Buyer’s Guide  or Home Seller’s Guide visit those pages and enjoy the home buying and selling experience at its best, with only most pleasant memories to share and remember for years to come.

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